Third Party Process in SAP MM | End to End Cycle with Configuration

Main ideas / lessons conveyed

• The SAP MM “Third-Party process” (also called a trading process) is used when a trader buys material from a vendor, and the vendor ships directly to the trader’s customer.
• It connects MM procurement with SD sales:
  • A Sales Order is created by the trader for its customer (end customer).
  • SAP then triggers a Purchase Requisition (PR) in the background for the trader.
  • The trader creates a Special Purchase Order to the vendor.
  • The vendor delivers directly to the end customer and submits an invoice to the trader.
  • The trader processes the vendor invoice, then creates the customer billing invoice via SD.

Key benefits claimed for the third-party/trading model

• No inventory management for the trader (goods are not stored in the trader’s warehouse)
• No transportation requirement from trader’s stock to customer
• No storage costs

Step-by-step business process (end-to-end)

1. Sales Order (SD)

   • Trader receives a Sales Order from its customer.
   • The Sales Order item is marked as relevant for third-party processing via the Sales document item category.

2. Automatic creation of Purchase Requisition (MM, background)

   • SAP automatically creates a Purchase Requisition (PR) in the background based on the Sales Order item.
   • The PR uses a third-party-related item category.

3. Create Special Purchase Order (MM)

   • Trader creates a Purchase Order (PO) against the PR.
   • This PO is a special procurement PO intended for third-party fulfillment.
   • The vendor is expected to deliver directly to the trader’s customer.

4. Goods Receipt (GR) — optional

   • Since the trader does not physically receive goods, GR is optional.
   • If performed, it’s posted against the PO.

5. Vendor invoice processing

   • Trader posts the vendor invoice using MIRO (referencing the PO).
   • Depending on the approach, GR may have been posted first or skipped.

6. Customer billing

   • Trader runs the SD billing to raise an invoice to its customer (typically based on the delivered quantity from the normal billing flow).
   • Example shown using VF01.

7. Completion

   • The flow is validated through document flow checks (sales order, PR, PO history, accounting documents).

SAP configuration / controlling logic highlighted

The video emphasizes that correct configuration links the relevant entities so SAP triggers the third-party flow automatically.

A) SD Sales document item category configuration

• Sales Order line item category must be: TAS
• Why: TAS indicates a third-party item and controls schedule line creation and billing relevance.
• Shown in config:
  • Tcode VOV7 → maintain item category TAS
    • Important settings mentioned:
      • Schedule lines allowed (enables schedule line creation)
      • Billing relevance (relevant for billing)

B) Link Sales item category group (from material master) → Sales item category

• Material master item category group must be: BNS
• SAP uses this to default the Sales Order line item category to TAS.
• Shown in config:
  • Tcode VOV4
    • Example: Sales order type O and item category group BS/BNS default Sales item category TAS

C) SD Schedule line category mapping

• Schedule line category used must be: CS
• SAP assigns CS to the Sales item category TAS.
• Shown in config:
  • Tcode VOV5
    • Item category TAS is assigned to schedule line category CS

D) Schedule line category drives PR creation settings (and PR internal item category)

• Schedule line category CS is for third party
• It contains settings that drive:
  • Purchase requisition creation
  • Document type and PR item category mapping
• Shown in config:
  • Tcode VOV6
    • Order type for PR document type (shown as PR creation related settings)
    • Internal representation of item category in MM:
      • Purchase requisition item category S corresponds to an internal number (video notes “item category S … internally represented by the number five”)
    • Account assignment category defaulted to X (as described)

Concrete transactional steps performed in SAP (as shown)

• Create Trading Material (MM)

  • Tcode MM01
  • Material type: HAWA (Trading goods)
  • Maintain the Sales view and set:
    • Item category group = BNS
  • Material created.

• Create Sales Order (SD)

  • Tcode VA01
  • Create sales order with:
    • Sales area (sales org, distribution channel, division)
    • Customer
    • Material
  • Critical fields shown:
    • Sales item category becomes TAS (via configuration)
    • Schedule line category becomes CS
  • Save the sales order.

• Check background PR creation

  • PR is auto-generated from the sales order.
  • PR item:
    • Item category S (third-party related)
  • PR viewed via:
    • Tcode ME53N

• Create Purchase Order from PR

  • Tcode M21N (PO creation referencing PR)

• Goods Receipt (optional)

  • Tcode MIGO
  • Post GR (video demonstrates doing it).

• Post Vendor Invoice

  • Tcode MIRO
  • Post vendor invoice against PO.

• Bill the customer

  • Tcode VF01
  • Save posted customer invoice.

• Validate document flow

  • Tcode VA03 for sales order document flow
  • Purchase order history reviewed for GR and invoice posting.

Essential “two things” to remember (explicitly stated)

• Sales order line item item category = TAS
• Purchase order line item item category = S
• The Sales item category TAS is driven from the material master item category group BNS, and the schedule line category CS drives PR creation.

Speakers / sources featured

• No other speakers are identified in the subtitles.
• The speaker is the YouTube channel creator/instructor (only referenced as “Hey everyone, welcome back to my channel”).